June 23, 2011
Mish's Daily
By Mish Schneider
Yesterday I wrote that QQQ might be the most decisive index. Most decisive thing about it turned out to be not to sell the lower opening, which one would have never done if one used the opening range rules as we do, but rather once it took out the morning range and got back over S2, buy the reversal. By the end of the day, it crossed S1 and the 200 day moving average leaving a bullish engulfing pattern after an inside day.
Whoa!
It actually turned out that SPY was the most decisive never failing the 200 day moving average, then running above S1 yet unable to close the gap that was left from the lower opening. Both QQQ and SPY had spikes in volume held key moving averages with highly volatile intraday activity. Bottom? Perhaps. But let's look at some of the negative aspects. Slope on the 50 day moving average still declining in both. As mentioned, SPY could not fill the gap and QQQ traded through the 160 day exponential moving average closing beneath.
Looking at IWM, as I have been writing for a while now, still has the better daily chart set up with higher than average volume but certainly not a volume spike. It had a test and hold of the 10 simple and 160 day exponential moving averages, never even got close to the 200 day moving average and still above the recent price consolidation from last week and earlier this week. It too has a declining slope on the 50 day moving average and fairly significant resistance first at 80.75 and then overhead at yesterdays high 81.11.
All of this continues to add up to what has been the most successful formula for trading these days-buy the stronger sectors and groups when the market is rallying and sell the weaker sector and groups when the market is trading lower. Within those groups, find the best and the worst individual stocks or stick to the ETF's unless you have a very long-term view, which by the way, is as divergent as the market itself. And now add to the mix-earnings season!
ETF's: We came in long SLV puts and covered three quarters of them. Stayed short the remainder in anticipation of the move down to support at 32. A trend changer would not happen unless it crosses back above the 50 day moving average.
GLD** no doubt lots of damage done here today, but it held the 50 day moving average which still has an upward slope plus the support from June 13 at 147.19. So damage done yes, but not a trend change. If GLD holds around 148 coming into tomorrow, would at least anticipate a rally up to fill the gap.
XRT no surprise that this turned out to be incredibly strong.
IBB** Stopped right before the adaptive moving average. Considering the overhead resistance, would not necessarily be looking to buy this now on strength, but rather on the dip to support and perhaps conservatively, after another day or so of consolidation.
SMH** stopped before the exponential moving average. Whereas I might not be in such a rush to short retail or biotechnology, I might be looking for a short entry on a break of the 200 day moving average.
With the news of the release of oil reserves, Energy and oil related ETF's opened extremely weak, but like many others, rallied by the end of the day. OIH is holding the 200 day moving average, XLE hasn't even gotten close to it; they are both still in a strong warning phase and neither were able to fill the gap even with the afternoon rally. On the weekly chart, both still have long term trends that are up, but could easily drop another 10% without violating the long-term trend. These would also be the areas to go to on weakness.
TLT kept a light long position overnight. Still approaching a possible Golden cross, looking for a rally up to 99.25 the spike higher from November 2010.
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